Australia sees a latte led recovery:Rate rises closer

Australians flooded back to their favourite coffee shops in August, in the clearest sign yet that the nation is seeing a latte-led recovery.

The Australian Bureau of Statistics reported yesterday that spending in Australia’s coffee shops, restaurants and take away food outlets rose by 1.9 per cent in August.

That was among the biggest rises in any sector, exceeded only by spending in Department Stores, which rose by 2.4 per cent in the month, on seasonally adjusted figures.

The overall rise, for the month, was a more moderate 0.9 per cent.  But that was still enough to cancel the revised estimate of a 0.9 per cent fall, in Australia’s retail sales, during July.

Even that rise, though, might be enough to bring forward Australia’s next rate rise, though most economists still expect the Reserve Bank board to keep rates on hold next Tuesday, when it meets to review interest rate levels.

The bank’s Governor, Glenn Stevens, says its present marker rate, of 3 per cent, is at a historically low level.

A senior Reserve Bank official, Tony Richards, also revealed on Tuesday that the bank is worried about rising house prices, which he blamed largely on supply constraints.

But the Australian Bureau of Statistics, which produced today’s retail sales figures, also had good news for him.

It reported that building approvals for private sector houses rose by 3.1 per cent on seasonally adjusted figures in August suggesting that some of the blockages in the supply chain have been cleared.

However the Master Builders Association later described the latest approval data as “mixed” saying investors are still being squeezed by the global economic crises and commercial building approvals are down.

The bureau had reported earlier that retail sales fell by 1 per cent in July, but it revised that to a fall of 0.9 per cent, when it released today’s figures.

The latest retail sales figures are seen as particularly important, as the Federal government’s stimulus package has now passed its peak, for most Australians.

So the strong result, seen in the latest figures, will confirm the views of those who believe private spending is returning to the economy, in the wake of the global economic crisis.

Australians spent 1.8 per cent more on food in August, while spending in furniture and household goods stores rose by 0.9 per cent.